The Analysis Of U.S. Monetary Policy Shocks On RMB Exchange Rate Against Dollar/Yen

China announced the implementation of the exchange rate formation mechanism reform in July2005.The RMB’s exchange rate is affected by market supply and demand and refer to a basket of currencies. Yuan started to appreciate modestly and continuously. The flexibility of fluctuations of RMB exchange rate increases unceasingly. This increases the independence of monetary policy and adapts to the market economy system in our country. The practice of exchange rate reform plays a great role in China’s economic development. However, as the subprime crisis took place in the United States in2007and triggered a global financial crisis, the U.S. government launched four quantitative easing (QE) monetary policy and applied quantitative tool to inject liquidity into the financial market from2008to2013. The loose monetary policy causes international liquidity. A large number of international capital flows to emerging economies. RMB suffered greater pressure of appreciation which increases the uncertainty of monetary policy in our country. Whether the appreciation trend of RMB mainly comes from the impact of unconventional quantitative easing monetary policy? How much of this appreciation comes from QE? The study of these problems is related to China’s central bank’s independence in monetary policy and the stable of exchange rate. Our research will help the central bank use exchange rate tool to deal with the spillover effects of QE and achieve domestic macroeconomic goal.This article combined the theoretical analysis and empirical test. We choose the U.S. monetary policy variables as sources of external shocks to study the effect on RMB exchange rate. At first, this paper summarizes the related literature at domestic and abroad. Then the author analyses the reaction mechanism of RMB exchange rate to cope with external shocks based on the theory model of RMB exchange rate determination. Empirical content mainly includes the following two parts:first, we use cointegration method and vector error correct model to analyse U.S. monetary policy shocks on RMB exchange rate in the long run. Then we use SVAR model to analyse short-term fluctuations of RMB exchange rate. Through long-term and short-term comparative analysis, we can fully exploring the U.S. monetary policy effects on RMB exchange rate. Then the second part we first use the recognition method put forward by Kim and Roubini (2000) and the relevant economic theory. We established a SVAR model which contains a large exogenous economy--the United States. And we add the intervention variable into the SVAR model in comparative analysis to analyse the monetary policy and exchange rate between China and Japan based on the perspective of intervention.Finally, we get the conclusion:First, monetary factors are significant on the long-term effects of the RMB exchange rate; Second, China and Japan would respond to U.S. monetary policy shock. The two countries will lower interest rates when face U.S. monetary policy shocks. And they will intervene in currency markets to curb excessive appreciation of their currencies.